Prop. C-You-in-Court

San Francisco voters just approved a $300 million effort to fight homelessness, but the city could be years away from getting the money due to a legal challenge.

The San Francisco “homeless tax” was one of the most talked-about ballot measures in the country this election season. Proposition C made national headlines and set off juicy Twitter feuds between billionaire tech CEOs, and the campaign to place a half-percent additional tax on businesses making more than $50 million cruised to victory with 60 percent of voters expressing their support.

But that big win might not have been big enough. A lawsuit has been filed arguing that the measure really needed a two-thirds majority to become law, and opponents of Prop. C claim San Francisco will never “see a penny” of the desired $300 million a year in tax revenue.

City Hall is taking this legal threat seriously enough that it plans to put all that homeless tax money on hold, possibly for years, until courts sort out these legal challenges.

Not all provisional and vote-by-mail ballots have been counted, but it’s looking close. As of Tuesday, Nov. 13, Prop. C was passing by 60-40, six percent short of the required threshold. But with just 56,000 votes left to count, Prop. C would need to secure all of those remaining votes to break the two-thirds mark. This leaves opponents declaring victory, even though they lost big at the ballot box.

“Despite outspending the No on C campaign by at least four-to-one, the Yes on C campaign failed to earn the two-thirds voter support necessary for San Francisco to ever see a penny that Proposition C promised,” No on Prop. C spokesperson Jess Montejano tells SF Weekly. “From day one, both sides knew that two-thirds voter support was necessary because of pending litigation from this year’s June primary election. The Yes on C campaign’s last-minute, multimillion-dollar investments failed to effectively move the needle, because voters were clearly divided.

“Homelessness affects every resident and businesses throughout San Francisco and deserves a serious response,” he adds, calling for “a consensus approach.”

The No on Prop. C campaign has not filed a lawsuit against the homeless tax measure, and claim they don’t need to, as a similar lawsuit is already in the San Francisco Superior Court system, filed to challenge the other Prop. C tax on gross business receipts, which San Francisco voters passed in June. Yes, on the very day London Breed was elected, San Franciscans also quietly approved a much less-ballyhooed measure of the same name that created a rent tax for childcare and early education programs. That measure just barely passed, with 50.87 percent of the vote. But a legal fight has been underway since August. The lawsuit was brought by the Howard Jarvis Taxpayers Association, a legacy anti-tax lobbying group behind 1978’s property-tax-slashing Prop. 13 and the 1996 Prop. 218 that created these state-level supermajority requirements.

“The California Constitution could not be more clear,” says association president Jon Coupal. “The two-thirds vote threshold mandated by Propositions 13 and 218 remains very popular in California.”

But the City Attorney’s office clarifies that the June’s lawsuit will not have an effect on November’s Prop C. This unresolved court case quandary puts San Francisco City Hall in a bind: If they spend that money on homeless services, they may be forced to pay it all back if the case is overturned. City controller Ben Rosenfeld laid out the temporary solution in a Nov. 7 letter to Breed and the Board of Supervisors.

“Given that the measure has been approved by more than a simple majority of voters, the Treasurer has indicated that his office will implement the collection of the tax, which is legally effective for the tax year beginning in January 2019,” Rosenfeld wrote.

But those funds are just going to sit on hold, not being spent on housing the poor, in what  Rosenfeld called a “segregated city account, where they will accrue interest until spent.

“My office would not be able to certify these funds given current legal uncertainties associated with the measure,” he said.

Breed avoided taking a side on the measure in her remarks to reporters last week.

“There’s still some uncertainty around Prop. C,” she said. “We’re not sure when the funds will be available to us to use. We can’t wait for Prop. C to go through the court system in order to act.”

In contrast, City Attorney Dennis Herrera has vowed to defend Prop. C. His office insists that the two-thirds supermajority requirement “applies only to special taxes emanating from the legislative body or the Mayor” — that is, only tax measures placed on the ballot by elected officials — and not to tax measures that made the ballot because voters gathered enough signatures.

Prop. C made it onto the ballot because supporters collected 28,000 signatures. And it may be significant that the full text of Prop. C contains the phrase, “This measure requires 50-percent-plus-one affirmative votes to pass.”

But that’s little comfort to the San Francisco Department of Homelessness, who can only watch on the sidelines as millions of dollars that would be directed to them sit in legal limbo.

“We are operating under the budget approved by the Board of Supervisors and will continue to do so until new funds become available,” department Director Jeff Kositsky tells SF Weekly“We have a plan, but new funding would enable us to expand our efforts and go even further than our current goals.”

So for now, the homelessness status quo remains in effect. People will continue to observe massive amounts of tech wealth in direct contrast to the rampant squalor on its streets. In the meantime, local corporations will continue to draw in billions and lawyers will fight over taxes while people remain unhoused and hungry.

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